Updated: October 12, 2021 9:25:59 am
On Sunday, the coal ministry sought to assuage concerns over inadequate coal supplies for thermal power plants and dispel fears of disruptions in power supply across the country. This comes after several states had raised the issue of dwindling coal with the Union government. While the ministry has emphasised that there were sufficient stocks to meet the demand, over the past few months, coal stocks at thermal power plants across the country have been declining, and they remain below the buffer norms. As reported in this paper, around half of the major coal-based power plants that are closely monitored have less than three days’ worth of stocks as per data from the Central Electricity Authority. In Delhi, three of the plants supplying power had coal stocks for only one day. Power plants are required to hold 15-30 days of coal inventory. States facing power shortages have thus been forced to buy power at much higher rates on the exchanges. On October 10, the average market clearing price rose to Rs 13.3 per unit compared to Rs 4.08 a month ago. This situation, a throwback to the years of shortages, has in fact forced some discoms to urge their consumers to use “electricity judiciously”.
A combination of factors, operating in tandem, has resulted in this sharp demand-supply mismatch. First, on the supply side, with the rainy season stretching out this year, there has been a considerable delay in coal supplies returning to normal levels. Second, with economic activity being impacted during the second wave of the pandemic, coal stocks were not accumulated to the level required. Third, there has also been a sharp increase in the price of imported coal owing to a rise in global demand. This has complicated matters. On the demand side, the sharp pick-up in economic activities — large parts of the economy are operating near or exceeding their pre-pandemic levels — has led to an unanticipated surge in electricity demand. There are signs of the situation getting better. Coal dispatches are improving. On October 9, compared to a consumption of 1.87 million tonnes, 1.92 million tonnes of coal were dispatched to thermal power plants, up from 1.5 million tonnes at the beginning of the month. This points towards a build up in stocks.
This situation reflects poorly on Coal India, which is by far the largest supplier of coal to the power plants. It does not bode well that over the years Coal India’s production has barely kept pace. On its part, the Centre has, reportedly, sought to rework the norms for supply and storage of coal at power plants. Though this may help at the margins, the larger issues that ail the power sector in India linger on.
This editorial first appeared in the print edition on October 12, 2021 under the title ‘Spectre of shortage’.
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